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Of paywalls and parachutes

19 June 2012

Fairfax media has announced sweeping changes to its news media empire.

One of the most notable of these changes is the plan to erect paywalls around its Australian news websites -- a move that will either save them or kill them.

The problem with paywalls is that they only work if you have some unique high-value content. If you're talking "pretty average" content then a paywall will simply drive people to other "free" publications and with those fleeing eyeballs goes your advertising revenue.

So it's a big gamble for Fairfax -- will it pay off?

Interestingly enough, it seems that Fairfax are having a bob each way with their online news media strategy, by opting to leave their NZ stable un-paywalled -- at least for the time being.

If they're thinking that they can't afford to paywall Stuff.co.nz so long as the NZH continues to offer its news for free -- they'd be dead right.

Here in NZ the NBR has been about the only news publication that has survived paywalling but, as I said earlier in this column, that's because they have some exclusive content that (generally high-income) folk are willing to pay for. None of our other dailies fall into this category.

I wonder what will happen if/when Fairfax decide to have a quiet chat with APN and we see the two organisations collude to introduce simultaneous paywalling -- effectively ensuring that there is no significant "news alternative" in the marketplace?

Will the Commerce Commission stand by and allow the two "daily news" giants form a cosy paywall duopoly?

Would it be fair for the CC to try and stop these publishers from both changing their business-model simultaneously -- after all, surely they have a right to decide exactly how they distribute their content?

With a fairly significant number of Kiwis now getting a good percentage of their daily news from APN or Fairfax websites -- I think the paywall issue could become a major one -- and perhaps a major opportunity for a second-tier news-site like Scoop.co.nz to significantly extend its readership and popularity.

The big problem is, of course, that if paywalls seem to work, every man and his dog is going to try and switch to the same model. We'll seek paywalls popping up left, right and centre -- with the result that many previously viable enterprises may find they've locked a huge percentage of their audience out and that those paywall subscriptions don't come close to meeting costs.

Of course the big problem for those who decide to try but then discard the paywall option is that the people who have paid are going to be mighty pee'd off if you turn around and then decide to make your content free again. They'll be wanting a refund -- perhaps at the very time a publisher finds their cashflow and reserves at an all-time low.

Erecting a paywall is therefore, somewhat like jumping out of an aircraft and hoping you have a parachute -- without knowing, until you pull the rip-cord, whether the pack on your back is filled with tatty rags or a life-saving canopy of rip-stop nylon.

The silly thing about Fairfax's move is that they're effectively ignoring a massive potential that's staring them in the face. They are uniquely placed to squeeze a whole lot more money out of their online media than they realise. It seems that the guys driving the Fairfax juggernaut have a very blinkered view of the Net and its users.

What a shame for them -- but what a glorious opportunity for someone else.

Watch for a really smart company to come out of left-corner in the areas that Fairfax are currently struggling to understand. I think that in another 3-5 years time, we'll see the giant Fairfax and its properties crumble to dust -- while newer, smarter, faster-moving innovators will move in and take over.

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